Kamal Pushp
Enterprises Vs. D.R. Construction Company [2000] INSC 390 (28 July 2000)
M. Jagannadha
Rao, J. & Doraiswamy Raju, J.
Raju,
J.
The
above appeal has been filed against the order of a learned Single Judge of the
Madhya Pradesh High Court dated 13.10.95 in C.R. No.561 of 1994, since reported
in AIR 1996 M.P.139, rejecting the Revision Petition filed by the appellant
holding that the provisions of Section 69 of the Partnership Act do not stand
in the way of an unregistered firm defending a proceedings against it and it
precludes only the initiation of any proceeding by such a firm.
The
Gas Authority of India Ltd., at Vijaypur, entered into a contract with the
appellant to execute certain works and the appellant in its turn had entered
into a separate contract with the respondent, indisputably an unregistered firm
for carrying out the work, the execution of which was undertaken by the
appellant under its contract with `GAIL. Disputes arose between the appellant
and the respondent. Thereupon, the appellant appears to have, invoking Section
8(2) of the Arbitration Act, 1940, served a notice on the respondent seeking
for consent for the appointment of an Arbitrator, in terms of the arbitration
clause, out of five proposed Arbitrators and the respondent gave its consent
for the appointment of a named Advocate, as the Arbitrator. The Arbitrator
entered into the reference and the appellant filed its claim and the respondent
apart from opposing the claim of the appellant stated its own claim. The
Arbitrator passed an Award in favour of the respondent and suo moto filed the
award before the trial court under Section 14(2) of the Arbitration Act. When
the Court issued notice to both the appellant and the respondent, it is at this
stage the appellant filed various objections, one of which was based upon
Section 69 of the Partnership Act, and the trial court appears to have framed a
preliminary issue of law under Order 14 Rule 2, CPC, for decision as follows:
``Whether the proceedings regarding making the award rule of Court are
maintainable as the non-applicant firm is not a registered partnership firm
under Section 69 of the Partnership Act? The learned Trial Judge decided the
preliminary issue against the appellant. Thereupon, the appellant moved the
High Court by way of a revision unsuccessfully and has come before this Court
with this appeal.
The
learned counsel for the appellant, initially, attempted an argument about the
propriety and illegality involved in the Arbitrator suo moto filing the award
before the Civil Court for passing a decree but when objected to by the
respondent that the revision before the High Court against which the present
appeal has been filed arose out of the only preliminary issue decided by the
trial court on the applicability or otherwise of Section 69 of the Partnership
Act to the case on hand, the arguments were confined to the question of
disability, if any, of the respondent, being an unregistered firm, for getting
any decree on the award of the Arbitrator, in the proceedings initiated by the
Arbitrator. Mr. Sanjay Parikh, learned counsel for the appellant, contended
that the courts below ought to have sustained the objection of the appellant
based upon Section 69 of the Partnership Act holding the proceedings to be
barred on account of the respondent being an unregistered firm. According to
the learned counsel the proceedings arising out of an award are certainly
proceedings arising out of the agreement between parties and would fall under
the category of ``other proceedings envisaged in Section 69 of the Partnership
Act.
Strong
reliance was placed in this regard upon the decision of (India) ltd. [AIR 1964 SC 1882]; Raptakos
Brett & Co. Ltd.
addition
to placing reliance upon some other decisions of the High Courts, to
substantiate his claim. It is unnecessary to refer to the decisions of the
various High Courts in the light of the decisions of this Court. Per contra,
Mr. Vimal Dave, while adopting the reasoning of the courts below, contended
that the provisions of Section 69 of the Partnership Act are no impediment to
the respondent getting relief as a defendant in the hands of the Arbitrator in
a proceeding initiated by the appellant itself and as long as the respondent
was only a respondent and had not initiated or commenced any proceedings of its
own, there is no merit in the preliminary objection raised, which, according to
the learned counsel, has been rightly overruled.
The
question as to the scope and ambit of Section 69 (3) was considered by this
Court in the decision reported in Jagdish Chandra Gupta (supra). An application
filed under Section 8(2) of the Arbitration Act for the appointment of a named
person or anyone else to go into the disputes between the parties was objected
to, among other things on the ground that Section 69(3) of the Partnership Act afford
a bar to the petition because the partnership was not registered. As against
the conclusion of the High Court that the application was maintainable, an
appeal was filed in this Court. In construing the words, ``a claim of set off
or other proceeding to enforce a right arising from a contract .., it was held
that the section thinks in terms of (a) suits and (b) claims of set off which
are in a sense of the nature of suits and (c) other proceedings and while the
section first provides for exclusion of suits in sub-sections (1) & (2) of
Section 69 the same ban is also applied to a claim of set off and other
proceedings to enforce any right arising from a contract. This Court ultimately
construed the words ``other proceedings in sub-section (3) of Section 69 giving
them their full meaning untrammelled by the words ``a claim of set off, and
held that the generality of the words ``other proceedings are not to be cut
down by the latter words. The said case, being one concerning an application
before Court under Section 8(2) of the Arbitration Act, 1940 in the light of
the arbitration agreement, this Court finally held that since the arbitration
clause formed part of the agreement constituting the partnership the proceeding
under Section 8(2) was in fact to enforce a right which arose from a
contract/agreement of parties.
The
above referred to decision was adverted to and the principles therein were also
applied in the subsequent decision reported in Raptakos Brett & Co. Ltd.
(supra) and on the facts of that case that the cause of action for the suit was
not the agreement of tenancy which lapsed by efflux of time but really one
arising under the General Law and Transfer of Property Act it was held that the
bar of suit or other proceedings based upon the lack of registration of the
firm does not apply to the case. In yet another decision of this Court reported
in Haldiram Bhujiawala (supra) rendered by a Bench to which one of us (M. Jagannadha
Rao, J.) was a party, following the earlier decision reported in 1998 (7) SCC
184 (supra) it was held that the bar under Section 69 (2) was not attracted to
that case since the suit for permanent injunction to restrain the defendants
from using the plaintiffs trade mark/name was based upon the statutory rights
under the Trademarks Act and on common law principles of tort applicable to
passing off actions and not under the unregistered partnership agreement.
The
persistent plea made on behalf of the appellant before us is that the bar
imposed under Section 69(3) is attracted to the case on hand and that inasmuch
as the same prohibits the enforcement of any right arising from a contract by
an unregistered firm, the objection can be taken at any stage i.e., even post
award proceedings instituted to enforce the award. Inspiration is drawn for
this claim from the decision of a learned Single Judge of the Madras High Court
reported in J. Belli Gowder vs Joghi Gowder and another [AIR 1951 Mad.683].
That was a case wherein an award came to be passed by an Arbitrator on an oral
reference or submission made. Unlike the law in force prior to the Arbitration
Act, 1940, the said Act in Section 2(a) defined an arbitration agreement to be
one made in writing to submit present or future differences to arbitration and,
therefore, it was held that after the coming into force of the Act an award
passed on an oral submission or reference can neither be filed and made a rule
of Court under the Act nor enforced apart from the provisions of the Act. This
decision which is based on the principle that the Arbitrator is a creature of
the contract between the parties and a reference to the Arbitrator could be
only by means of an agreement in writing only indicates that such infirmity
goes to the root of the very jurisdiction of the Arbitrator to enter into the
reference and decide by passing an award and in our view the same can be of no
assistance to the case of the appellant. It is not the case of the appellant
before us that there was no arbitration clause in writing or that the dispute
is not arbitrable but yet the Arbitrator has undertaken it for decision.
As
rightly pointed out for the respondent the very reference came to be made at
the instance of the appellant and what is really objected to in the form of a
preliminary issue is only the infirmity based upon Section 69 of the
Partnership Act, 1932.
The
prohibition contained in Section 69 is in respect of instituting a proceeding
to enforce a right arising from a contract in any Court by an unregistered
firm, and it had no application to the proceedings before an Arbitrator and
that too when the reference to the Arbitrator was at the instance of the
appellant itself. If the said bar engrafted in Section 69 is absolute in its
terms and is destructive of any and every right arising under the contract
itself and not confined merely to enforcement of a right arising from a
contract by an unregistered firm by instituting a suit or other proceedings in
Court only, it would become a jurisdictional issue in respect of the
Arbitrators power, authority and competency itself, undermining thereby the
legal efficacy of the very award, and consequently furnish a ground by itself
to challenge the award when it is sought to be made a rule of Court. The case
before us cannot be said to be one such and the learned counsel for the
appellant though was fully conscious of this fact, yet tried to assert that it
is open to the appellant to take up the objection based upon Section 69 of the
Partnership Act, at any stage - even during the post award proceedings to
enforce the award passed. The Award in this case cannot either rightly or
legitimately said to be vitiated on account of the prohibition contained in
Section 69 of the partnership Act, 1932 since the same has no application to
proceedings before an Arbitrator. At the stage of enforcement of the award by
passing a decree in terms thereof what is enforced is the award itself which crystallise
the rights of parties under the Indian Contract Act and the general law to be
paid for the work executed and not any right arising only from the
objectionable contract. It is useful in this connection to refer to the
decision of this Court in Satish Kumar & others vs Surinder Kumar &
others [AIR 1970 SC 833], wherein it has been stated in unmistakable terms that
an Award is not a mere waste paper but does create rights and has some legal
effect besides being final and binding on the parties. It has also been held
that the award is, in fact, a final adjudication of a Court of the parties own
choice and until impeached upon sufficient grounds in an appropriate
proceedings, an award which is on the face of it regular, is conclusive upon
the merits of the controversy submitted for arbitration. Consequently, the post
award proceedings cannot be considered by any means, to be a suit or other
proceedings to enforce any rights arising under a contract. All the more so
when, as in this case, at all stages the respondent was only on the defence and
has not itself instituted any proceedings to enforce any rights of the nature
prohibited under Section 69 of the Partnership Act, before any Court as such.
We see no infirmity or error whatsoever in the decision of the courts below to
call for our interference in this appeal. The appeal fails and shall stand
dismissed.
We
make it clear that we have decided only the point relating to the preliminary
issue raised and decided by the trial judge as well as by the High Court, and
all or any other objections and contentions may be raised and pursued by the
respective parties in the proceedings pending before the Trial Court. The
parties will bear their respective costs.
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